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Subgame Perfect Nash Equilibrium: A Learning Approach via Costs to Move

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Abstract

In one-leader one-follower two-stage games, also called Stackelberg games, multiplicity of subgame perfect Nash equilibria (henceforth SPNEs) arises when the best reply correspondence of the follower is not a single-valued map. This paper concerns a new method to approach SPNEs which makes use of a sequence of SPNEs of perturbed games where the best reply correspondence of the follower is single-valued. The sequence is generated by a learning method where the payoff functions of both players are modified subtracting a term that represents a physical and behavioral cost to move and which relies on the proximal point methods linked to the Moreau–Yosida regularization. Existence results of SPNEs approached via this method are provided under mild assumptions on the data, together with numerical examples and connections with other methods to construct SPNEs.

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Acknowledgements

The authors wish to strongly thank two anonymous referees for their helpful comments and suggestions.

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Authors and Affiliations

  1. Department of Economics and Statistics, University of Naples Federico II, Via Cintia 21, 80126, Naples, Italy

    Francesco Caruso & Maria Carmela Ceparano

  2. Department of Economics and Statistics & Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II, Via Cintia 21, 80126, Naples, Italy

    Jacqueline Morgan

Authors
  1. Francesco Caruso
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  2. Maria Carmela Ceparano
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  3. Jacqueline Morgan
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Correspondence to Jacqueline Morgan.

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Caruso, F., Ceparano, M.C. & Morgan, J. Subgame Perfect Nash Equilibrium: A Learning Approach via Costs to Move. Dyn Games Appl 9, 416–432 (2019). https://doi.org/10.1007/s13235-018-0277-3

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